A ‘healthy’ turn to innovation in insurance

Insurance companies deal with risk. And, as new forms of risk constantly emerge — from driver-less cars to activity-monitoring gadgets that judge health to millennials interacting only on the digital platform — insurance players have had to evolve. Interestingly, so too, the regulator. In July 2016, the Insurance Regulatory Development Authority introduced several regulatory changes to health insurance. Such regulation has the potential to change the way risk, indemnity and other insurance products have been traditionally covered. We take a look here at the top five changes. Note at least one thread that connects them all – an impetus to innovation. Previously, insurers required prior IRDA approval to withdraw products in the market and were therefore reluctant to introduce new products. The structure of health insurance policies was thus kept as predictable as possible and innovation in in the range of products that could be offered was stymied. The new regulations allow insurers to roll out products on a pilot basis and allow them the flexibility to even withdraw them after 5 years, without procedural hassles. While insurers still need a valid reason to withdraw the product, it allows them far more flexibility than afforded earlier and to attempt to cover risks that had not been addressed until now.
The regulatory changes, however, mandate that when pilot products are withdrawn from the market, insurers should ensure that such customers can port to an existing health insurance product of a different provider.
The regulator has also brought in transparency in mandating minimum pay-outs and product information, enabling a menu of offerings across health insurance products, portability and easy withdrawal of pilot products through the new regulations. To promote wellness and preventive health care, insurers can now offer a discount on the renewal premium in case of demonstrated improvement in health. However, parameters that qualify for improvement have to be disclosed upfront in the product prospectus. Insurers can now promote and cross-sell outpatient consultations or treatment, pharmaceuticals or health check-ups offered by the insurer’s network providers (hospitals and clinical establishments) and offer discounts in cashless transactions.
While some insurers have been providing wellness offerings and discounts, the regulator now requires them to be mentioned in the product filing. Having mentioned it in the filing, the company cannot withdraw offers without a valid reason. Although the 2013 regulations brought in access to the insured availing of non-allopathic treatment or AYUSH (Ayurveda,. Unani, Sidha and Homeopathy), the move towards wellness and well-being has set the regulator on par with insurance regulators in the U.S. and the U.K. Life insurers can no longer offer pure indemnity-based products which assure a sum at the end of tenure. This used to resemble a financial protection plan rather than health risk cover. The aim of the new regulations seems to be to de-link financial protection-type plans from health insurance products and restore the primary objective of providing pure health cover under health insurance. It allows the health-life product players to compete on annual pricing, product packaging and rewarding good behaviour of the insured such as early subscription to a plan and continued attachment to the provider.
Prior regulations stipulated that there should be a commonality of purpose as well as an economic or non-economic relationship among group members. Separate guidelines governed the group, group agent and the group insurer. The new regulations mandate that the minimum size of the group be fixed at 7 as compared with the arbitrary decision left to the discretion of the insurer, earlier. This is a significant step towards sanitising the competitive group insurance market. Earlier, any collection of individuals could form a group but if they did not all have a similar risk profile then, logically, the same risk cover may not hold for each of them.
The renewal norms have also been made less stringent. An insurer shall not resort to fresh underwriting of his risk by calling for a medical examination or a fresh proposal form at the renewal stage of policies. (Earlier, such a possibility existed. If the insured had made a claim the previous year, renewal procedures could change.) Insurers are now encouraged to reduce loading the premium with a risk element, in case of improvement in the risk profile of the insured. In sum, the new health insurance regulations, cognisant of dynamic market realities, enable players to innovate and compete in the health insurance ecosystem. It admirably balances customer protection and the commercial interests of the insurers.

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